State funding to New Haven at stake in governor’s race

Gov. M. Jodi Rell has led Connecticut for six years. But come January, the state will have a new governor, and whether it is former Stamford mayor Dan Malloy or former U.S. Ambassador to Ireland Tom Foley will influence the resources New Haven has at its disposal.

The powers that be in Hartford can affect New Haven by determining the amount of state funding the city receives, including in the form including PILOT (payment in lieu of taxes) grants, which partially compensate municipalities for the revenue they do not collect from tax-exempt properties, such as Yale and Yale-New Haven Hospital.

In recent years PILOT payments to New Haven have been declining, making the Elm City more reliant on property taxes, which have been hard hit by the recession. Malloy, a Democrat who is currently ahead of Republican Foley in a recent Quinnipiac University poll by 9 percentage points, has said the state should increase the size of the PILOT program, and that, as the former mayor of the state’s fourth largest city, he understands the challenges facing Connecticut’s urban areas. Foley, on the other hand, has made reducing the state tax burden on Connecticut’s residents one of the tenants of his campaign and says he wants to give municipalities more freedom to impose their own taxes.

“There’s a lot of pressure on the state because we simply don’t have the resources to do what we’ve done in the past,” Foley said. “We need to figure out where we can cut back with doing the least amount of pain.”

Foley has said he plans to close the deficit with about $2 billion in cuts, but New Haven State Rep. Gary Holder-Winfield said that cannot happen without reducing the flow of state funds to Connecticut’s cities.

While Foley has said neither that he will cut PILOT nor that he will increase it, Quinnipiac University political science professor Scott McLean said that if Foley is elected, there is a fear that he will cut PILOT. Without that state aid, municipalities will have to rely more heavily on local property taxes, State Sen. Martin Looney said.

“That is not in New Haven’s interest,” McLean said.

This year, New Haven advocated the state legislature for increased PILOT funding. To that end, it supported a statewide property tax whose revenue would be distributed to local governments through programs such as PILOT. According to the city’s fiscal year 2010-’11 budget, the tax would have cost New Haven residents $2.7 million and would have brought $39 million in revenue to the city. The issue was discussed at this year’s legislative session. To date, the state assembly has not passed the proposal.

Regardless of which candidate prevails, Rell’s successor is expected to inherit a $3.4 billion deficit for fiscal year 2012 and will have to take steps to close the gap. And the gubernatorial election may determine the extent to which painful budget cuts at the state level causes budget pain at the city level.

MONEY MAKES THE WORLD GO ROUND

As far as New Haven is concerned, money is what is at stake in the election, state and city officials and experts say; the measures the next governor takes to close the budget deficit could affect New Haven, Mayor John DeStefano Jr. said.

For the past two years, the city expected to receive more PILOT funding from the state than Rell ultimately allocated in the state budget, but this year it reduced its expectations for the amount of money it would get from the state. As a result, the city had to construct its budget under tighter constrictions.

In an interview with the News this month, Malloy said that, if elected, he will advocate for PILOT by restoring its funding. He said the state is supposed to reimburse PILOT at 70 percent but is currently doing so at about 50 percent.

Malloy said it is not necessarily something he can get done in his first year of office, but that the state should honor its commitments to the cities that house property tax-exempt institutions.

But while cities are in financial straits, the state is as well, Foley said. Foley has said he supports allowing municipalities to find their own ways of taxing outside of the property tax.

“I don’t think that the state should be restricting communities from determining what the best tax or revenue resources are for them,” Foley said. “I’m more of a local control advocate.”

McClean said New Haven would benefit from being able to tax things such as entertainment, but he noted that taxing bars will not be enough to make up for the reductions in PILOT funding and state grants.

“New Haven would not be able to sustain itself if it didn’t have state grants,” McLean said.

DeStefano, a career-long Democrat, said he supports Malloy because Malloy understands the challenges facing Connecticut’s cities. (DeStefano originally endorsed Ned Lamont SOM ’80 in the gubernatorial primary in August.)

“[Malloy] has a stronger understanding and view of the critical role that cities play in jobs and wealth creation and accordingly would best serve the interests of our communities,” DeStefano said.

Other Democratic city and state officials agree. (All of New Haven’s representatives in the state legislature are Democrats.) New Haven State Rep. Bob Megna said Malloy would be a more “sympathetic” governor for cities because of his background as mayor of Stamford.

Sitting in Blue State Coffee on Wall Street this month, Malloy — who would be the first Democratic governor of Connecticut in 20 years — said he and Foley differ most dramatically in their views on the nature and extent of the state government’s obligations to their urban counterparts.

“I’m an urbanist,” Malloy said. “I have a full array of urban-centric policies. Not exclusive urban policies, but urban-centric.”

But Foley contends that his approach of allowing cities to impose their own taxes would be good for cities, and that he has the management experience necessary to govern.

Since New Haven has a thriving (albeit seemingly more and more dangerous) nightlife scene, which draws partiers from neighboring communities, McClean said Foley’s proposal could, for example, make it easier for New Haven to raise additional taxes on the venues to make sure people using the city for fun pay to do so. (Malloy has also said he supports “local option” taxes within cities.)

In 1985, Foley started the NTC Group, a long-term equity investment fund, which advised portfolio companies on strategy and management decisions, he said. He added that he has more than 25 years of experience creating jobs and bringing money into communities.

Still, the real fight for voters is in the suburbs, McLean said, because cities such as New Haven are more likely than not to vote Democrat.

Add according to the latest Quinnipiac University poll, Connecticut voters are first and foremost concerned about jobs and the economy, said poll director Doug Schwartz. In the university’s most recent poll, he said, Connecticut’s unemployment rate stood at 9.1 percent in August, according to the Connecticut Department of Labor.

“I think we also have to bear in mind that Malloy is not going to win by saying things like, ‘I want to spend a lot of money on Connecticut cities,’ ” McClean said.

But there is a lot that has not been articulated on the campaign trail yet, DeStefano said.

“The only thing that is certain is that there is going to be change,” DeStefano said.